Operating risks
A)include variability in sales from changing economic conditions (cyclicality risk).
B)include variability in sales from short product life cycles (because of technological change or changes in consumer taste).
C)include variability of earnings that arises when the firm has a high proportion of fixed costs that do not change as sales change.
D)Answers a, b, and c are correct.
E)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

All three options (a, b, and c) are correct examples of operating risks that a company may face. Cyclicality risk refers to the variability in sales due to changes in the economic conditions, short product life cycles may lead to a decrease in sales, resulting in the loss for the company, and high fixed costs may lead to financial losses when sales volumes drop. Therefore, option D is the correct answer.

Operating Risks